Logo
Home Study Material Contact Search
AI Chat FREE
  1. business
  2. accounting
  3. governor of state x is considering investing on a

Governor of State X is considering investing on a 100-mile highway connecting state's two cities:...

50.1K

Verified Solution

Question

Accounting

image

Governor of State X is considering investing on a 100-mile highway connecting state's two cities: A and B. Today, governor is presented with three options: Option l: Asphalt, costs $200,000 per mile and lasts for 8 years after which it has to be replaced. It Option Il: Concrete, costs $1,200,000 per mile lasts 20 years and needs to be maintained every 5 years at a cost of $240,000. Option II: New material, not fully tested for long term durability. It costs 1,294,400 per mile. It will last 16 years with 80% chance and 10 years with 20% chance. Due to weight considerations, option I will not be able to accommodate heavy commercial vehicles which is estimated to cost $12,00,000 per year to state X MARR is 10%. which option shoud i7 b) What is the risk of choosing the third option measured by its standard deviation? c) If pretesting the third option is available to remove the uncertainty completely today, before any selection is made and any cost is dispersed, would the governor pay for this test? What is the maximum amount that she would pay

Answer & Explanation Solved by verified expert
Get Answers to Unlimited Questions

Join us to gain access to millions of questions and expert answers. Enjoy exclusive benefits tailored just for you!

Membership Benefits:
  • Unlimited Question Access with detailed Answers
  • Zin AI - 3 Million Words
  • 10 Dall-E 3 Images
  • 20 Plot Generations
  • Conversation with Dialogue Memory
  • No Ads, Ever!
  • Access to Our Best AI Platform: Flex AI - Your personal assistant for all your inquiries!
Become a Member

Other questions asked by students